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Raytheon vs. Pirates

It's time to get Active (Denial System) about the threat to merchant shipping.

It's just a fact that U.S. Navy snipers don't come to the rescue every time a freighter is seized by pirates off the coast of Africa. The saga of the U.S.-flagged Maersk Alabama and its heroic captain, Richard Phillips, a Vermonter who volunteered to become hostage to the pirates in exchange for his crew's release, has dominated the news over the past several days.

The storyline is familiar, if not the ending. Typically, it goes something like this: A Cyprus-flagged, Dutch-operated, Greek-owned tanker is hijacked in the Gulf of Aden. Someone, somewhere, pays a $2 million ransom, and the ship is released. Lather, rinse, repeat. Already today, CNN is reporting that two additional freighters have been hijacked by pirates off Somalia.

What is going on? I'm not saying merchant mariners should be equipped to fend off attackers with Uzis, but let's at least give them nonlethal means of protecting themselves and their cargo. There's one company with a foot already in the waters.

Blackbeard lives!Ransom due to piracy off the Horn of Africa, targeting commercial shippers including Maersk and DryShips(NASDAQ:DRYS), cost some $150 million industrywide in 2008. So far in 2009, the trend of pirate attacks has been heating up. More importantly, the insurance rates for boats traveling through the Gulf of Aden have risen tenfold in the past year, putting additional pressures on shipping margins.

Circumstances have forced shippers like Frontline(NYSE:FRO) to make plans to reroute their vessels, lengthening voyages and raising the cost of shipping for buyers like oil magnates BP(NYSE:BP), ExxonMobil(NYSE:XOM), and Chevron(NYSE:CVX). Big as this story is, though, the bigger question is this: How do four guys in a skiff succeed in hijacking a much larger vessel, manned by a crew of 20?

Answer: The pirates had guns; the crew did not.

Who brings a knife to a gunfight?Saturday's Wall Street Journal described the debate raging among merchant mariners who want guns to protect themselves from the pirates, and shipowners who seem to think it cheaper -- and less complicated -- to just pay the ransoms. Worries about arming the merchantmen range from insurance costs (more guns means more people getting shot, and lawsuits filed) to fears that commercial ports will balk at letting armed vessels dock.

Personally, I see no reason why the ships should not be armed. If a bodega owner can keep a sawed-off shotgun under the counter to protect his cash register, why can't a Saudi supertanker keep a few 9 mm pistols in its weapons locker to protect a $250 million investment? But I understand the shipowners' concerns, too. And in them, I see an opportunity for Raytheon(NYSE:RTN) to save the day -- and make some sales of its new high-tech "nonlethal" weapons system called the "Silent Guardian."

Raytheon to the rescueLegal and regulatory concerns aside, critics of the move to arm merchantmen argue that small arms won't be enough to defend commercial vessels. Pirates, they point out, do not bring knives to a gunfight -- or even limit themselves to small arms. They routinely take to sea armed with everything from fully automatic assault weapons to rocket-propelled grenades.

And while I can see commercial vessels finagling permission to carry rifles and pistols in a secured weapons locker, escalating the armament to RPGs and .50-caliber machine guns bolted to the poop deck would be another thing entirely.

But what about a high-tech, nonlethal alternative? Raytheon's Silent Guardian Active Denial System (ADS) uses millimeter wave technology -- basically, it's like a big microwave oven with a "shootin' end" -- to excite water molecules in the surface layers of the skin of its targets. The effect has been described as creating the sensation of "a [lit] light bulb being pressed against the skin." However, the weapon is nonlethal because its radiation cannot penetrate deeply enough into the human body to cause lasting injury.

Weighing in at more than three tons and carrying an antenna nearly four feet square, Raytheon's ADS is a bit bulky for the average foot soldier to carry into battle. But I imagine it would fit quite nicely amidships on a supertanker. What's more, in addition to being nonlethal, ADS boasts the range necessary to keep bad guys at a safe distance.

"Arrr … you got me!"Raytheon has already been exploring the possibility of using ADS to foil pirates, and so has the Navy. A November article in Navy Times describes inquiries that the Navy made regarding its ADS in warding off pirates -- a so-called "urgent need statement" issued by Fifth Fleet commander Vice Adm. Bill Gortney.

But the Navy cannot be everywhere at once; civilian vessels off the African coast must therefore be equipped with the means to defend themselves. Is Raytheon's system cost-effective enough for shippers to install it on their at-risk fleets of ships?

While pricing is notoriously difficult to pin down on defense weaponry, the Los Angeles County Sheriff's Department had Raytheon build it a slimmed-down prototype for $3 million. A larger order of the weaponry would likely bring further cost reductions. If the pirate threat continues to escalate, this could be a reasonable purchase, especially for valuable tankers and cruise ships within the area.

If small arms aren't big enough, and heavy machine guns are a politically untenable alternative, then ADS just might be the answer we need to defeat the pirates -- and plump up Raytheon's profits in the process.

Author

I like things that go "boom." Sonic or otherwise, that means I tend to gravitate towards defense and aerospace stocks. But to tell the truth, over the course of a dozen years writing for The Motley Fool, I have covered -- and continue to cover -- everything from retailers to consumer goods stocks, and from tech to banks to insurers as well. Follow me on Twitter or Facebook for the most important developments in defense & aerospace news, and other great stories besides.